It’s been a tough run for supporters of retail utility deregulation. Few states in the last 15 years have shown enthusiasm for adopting the model, and the handful of states that did restructure their utilities in the 1990s and early-2000s have been retreating from it in various ways. It’s not hard to see why.  When it comes to electricity, customers care most about reliability, affordability, and consumer protection. Unfortunately, retail deregulation has failed to deliver in these areas.

Against that backdrop, retail deregulation supporters havereleased a new paperthat purports to show the benefits of deregulation. But it is a swing—and a miss.

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Power for Tomorrow wishes all participants in this month’s NARUC Summer Policy Summit an enjoyable visit to Austin.  But with ERCOT setting a new demand record of 80,828 MW in June amid 19,000 MW of unplanned firm and renewable outages, and with Texas policy makers yet to address the fundamental  flaws in deregulation that have led to the state’s recent electricity woes, we also want to make sure all attendees have the tools they need to stay safe.

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Two years after Winter Storm Uri caused blackouts and hundreds of deaths across Texas, it is becoming harder to figure out whether anyone will truly be held accountable for the near-collapse of the power grid—and whether anyone will fix the problems before the next crisis.

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For years, energy policy wonks have asked when RTOs will expand.  Perhaps just as pertinent a question at this point is, “why would a state willingly subject itself to this chaos?”

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If you’re looking for a well-researched report that puts a human face on many of the pitfalls of electricity deregulation, you’d do well to review the recent series from Miriam Wasser of WBUR, the NPR station in Boston.  It highlights several major concerns such as customer cost, consumer protection and a lack of transparency by marketers regarding the power they are selling.

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Too often, debates about wholesale “markets” are driven by superficial discussions about competition being preferable to regulation.  Of course, that is true, but how do we compare an increasingly dysfunctional “competition” construct to generally functioning and well-understood regulation of an essential public service? 

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Among the alphabet soup of acronyms known by RTO-watchers is one that is cropping up with increased frequency: the RMR (or for the uninitiated, the “reliability-must-run” contract). These cost-of-service based contracts are last-ditch measures that throw lifelines to plants needed for reliability, but that would otherwise close based on the revenues they derive from the market. Practically, the result of RMRs is that generation units are insulated from the outcomes of markets and paid instead based on their cost to operate.

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The list of challenges within PJM is growing, and quick fixes are not readily apparent.  PJM, FERC and the states will need to avoid the missteps that have imperiled other RTOs, as in Texas and California, where the threat of blackouts and volatile prices are a year-round concern.

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In addition to the sizable increase in generation capacity that would be required to energize a large fleet of EVs, the wires portion of the utility business would need to invest billions to accommodate changing power demands and dynamics. 

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Any casual observer of politics knows that hyperbole is a frequent, if unwelcome, occurrence in public policy advocacy.  Sometimes, however, an exaggeration is so wild that it drifts into delusion.  Such is the case with a collection of electric deregulation’s biggest boosters called the Texas Competitive Power Advocates (TCPA).

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Supporters of the deregulated utility model like to portray themselves as plucky pro-consumer white knights, in contrast to traditionally regulated utilities.  Turns out, the deregulated oligopolies are more than capable of securing the sort of anti-competitive, anti-consumer sweetheart deals that they accuse other companies of seeking.

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Deregulation is sold in a variety of ways to the public, but it keeps coming up short in practice.  To be sure, there are those who benefit – the competitive suppliers, the big customers, particularly from the tech industry –but the regular consumer has seen no benefit, and much confusion.

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The latest developments in PJM are symptomatic of a broader issue that has been in plain sight for some time now: the RTO/ISO model, and particularly the strain of the capacity market model, is not only dysfunctional—it is outright failing.

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It may be weeks until spring in much of the U.S., but ideas for fixing broken electricity markets are beginning to bud across the country.  And while you wouldn’t know it if you only read current events through a Washington, DC lens, it has long been true that the frontlines of energy policy are in the states.  With legislatures now in full swing throughout the country, it’s a good time to highlight some of the more interesting matters taking shape in the states.

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As January turns to February, there is still time for one last New Year’s Resolution, so let’s start by offering a resolution to FERC Chairman Phillips: Emphasize the need for FERC to get back to basics.

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The new year is a time for resolutions, both attainable and unattainable.  In the state regulatory space, however, particularly in a time of rapid transition and challenging markets economics, it is important to develop a resolution with a clear and focused goal.  For state regulators, regardless of political stripe or policy bent, the recent State of the State by new Nevada Governor Joe Lombardo is worthy of review and reflection.

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The new year arrived with some bad press for the small but vocal group of electricity deregulation advocates that continues to peddle its preferred policy prescriptions.  It came in the form of a New York Times article highlighting the failure of electricity deregulation to deliver on its promises of lower energy costs for consumers.

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Over the next several weeks, this blog will propose New Year’s Resolutions for those in and around the electricity policy arena.  We will start with one that should always be first in the minds of anyone with responsibility for oversight of the electric grid: shore up reliability and resource adequacy.

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Last month, the North American Electric Reliability Corporation (NERC) released its 2022-2023 Winter Reliability Assessment, and it should serve as a wake-up call for those still arguing that the deregulated electricity model is a beacon for the nation to follow.

The fact is, it is a failed experiment, and one no other state should adopt.

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The anti-consumer effects of deregulation become more evident every day as the energy inflation crisis continues.  It should serve as a wake-up call for those willing to study the outcomes being produced in our nation’s state policy incubators.

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